Is Something Blowing Up In OIL?

Tyler Durden's picture

A week ago we warned of some insane movements and mysterious bid in OIL (the Barclays iPath oil tracking ETN) as it traded a stunning 36% rich to its underlying NAV. Well with oil resurgent today, as contracts roll, something just imploded in OIL...



As Barrons noted, the sharp performance divergence stems from the ETN’s massive price premium over the value of the index it tracks.

Pravit Chintawongvanich, head derivatives strategist at Macro Risk Advisors, notes that OIL’s premium rose sharply in recent days and accelerated to 48% by Wednesday’s close. He told Barron’s that institutional traders noticed the extreme premium and are now betting against OIL on the premise that the unusually large premium will revert to normal. Trading volume in OIL was already more than triple the average over the past month on Thursday with three hours left in the trading day.

Even after today’s drop, OIL is still at a roughly 20% premium to its underlying index.

Chintawongvanich says that it’s not too late for investors who own OIL to ditch it for USO: “You don’t want to be stuck holding the bag when this drops to NAV.”

*  *  *

Simply put - retail moms and pops who piled into OIL without thinking about NAV or technical flows just got f##ked!

As we concluded previously, The current situation is eerily reminiscent to the heyday of the mortgage market in 2007, when mortgage defaults started to pick up, and yet the credit default swaps that tracked them continued to decline, bringing losses to those brave enough to trade against the crowd.

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Goldbugger's picture

What a wonderfull recover OIL is having .

Shell Fires Another 10,000; Energy Layoffs Top 250,000; Oil Breaks $28 Again;

allamerican's picture

im buried inboard.

last two weeks short vol, long oil.  only producing single digi's...

fucker still want play short sp and long T like bagass geaoge...

it'll work but need more downsides sp and oil..

butterfly, condor, dead flys, condums.. not working. just 30 cent bear calls.  waste time but pay rents..

Dapper Dan's picture



Schlumberger cut thousands of jobs in fourth quarter on $1 billion loss |

Schlumberger axed another 10,000 jobs and reported a net loss of $1 billion during the final three months of 2015, the world’s largest oil field services company reported Thursday.

Since peaking at a global workforce of 130,000 in 2014, Schlumberger has cut more than 25 percent of its employees, or 34,000 jobs, since then.


them were good paying jobs folks not hamberger flipping jobs,

Bon Appetit


Amun's picture

"Supply contracts for actual oil makes only 2% percent of the market, the rest - "98% of the oil market" is speculative securities, futures. The futures market is completely controlled by the largest US banks."

InsanityIsWinning's picture

Article in Barrons highlighted the tracking error (disaster) with that particular OIL etn . . . 

The Count's picture

"Simply put - retail moms and pops who piled into OIL without thinking about NAV or technical flows just got f##ked!"


This exact same thing happened to me about 10 years ago before I got out of this house of cards permanently. The entire bull shit market is rigged.

OzFan's picture

"Simply put - retail moms and pops who piled into OIL without thinking about NAV or technical flows just got f##ked!"


cleverusername's picture

looks like beaumont is about to have and explosion aswell

401K of Dooom's picture

Woooowwwwwww, Moby Dick just let one Riiippppp!!!!!!   Captain Ahab wil be pissed!  Good job Moby!

Victory_Garden's picture



Be there no false flaggin any moar on the Bounties, Main Street!

All hands on deck. Them babyloninas are on the March to create moar chaos to control using the fear mechanisms, and media deployment of weapons of harmful mental destruction. The front running worst weapon of all, the face-CIAduh-book that steals all your private info without your knowing or permission, will run point and center in their circle of madness-n-chaos out of order games. Moar govt sponsored zioterror for babylon and the whore, money-god.

Embrace that which is real. Embrace your self, the eternal Soul you ALL are in what ever biological form you might be in. You are important, and integral. Each, and Every One. A snow storm is not a snow storm, if it is missing the vote of one single snow(soul) flake. It is a storm because it is whole, and complete. Every snow flake integral, and important to the over all survival of the whole. If one snow flake is not there at the time is should be, there will be no snow storm.

And you, the clankity-clank, the machine, remember, we all do not have to do this, as you know the end result. Mutual Existence in Harmony, is the only way to survive. It will only be peace for all, unt, zat does not mean, Rest In Peace for Freedom, and Liberty, and the right to make ones free will choices as given by Creation.

Be a wise Magician!

Lugnut's picture

To borrow  an anlaogy, the Saudis' (different ones this time) are flying the OPEC 747 into the Global Economy's WTC . Allah Akbar!

Pogo5187's picture

I like my USMC version better: Hey Jihadi John, come over here, and TAKE THIS! ALL OF MY KABAR!

OilCaptain's picture

Wow.  You all write as if any of this shit matters.  Chill.  You prepared didn't you?  Sit back, take a sip of wine.  You got this.

kianator's picture

Low single digits price levels in OIL and USO ETFs will reward the patient (5-10 years) long-term investor. Though, it will be impossible to predict when it will bottom out....

Chad_the_short_seller's picture
Chad_the_short_seller (not verified) Jan 21, 2016 8:15 PM

Um no but oil is blowing UP in price. 

kianator's picture

You buy commodities in the gloom & doom BUST/FEAR cycles when assets come down anywhere near their book values!  We are not quite there yet and there are still plenty of sellers sitting around in OIL and other energy ETFs...

Yen Cross's picture

 I spent a good  2-3 hours researching those metrics. Those charts were effin sweet.

 I wonder how many macro funds use those charts for their MOMO portfolio allocations?

 Base holding profiles. 10 percent prime debt and 90 percent piece~mealed [segregated] JUNK.

antonina2's picture

I am not sure that anyone has bruoght this up yet, but the difference in price does not have anything to do with oil.  The issue at hand here is that Barclays restricted the number of bonds/ETNs that could be issued, so the price went up.  So, while the ETN premium will snap back into place, it will not affect the price of oil one bit.  It is an isolated situation due to the fact that it was Barclays that instigated the increase in price.  Here is a blurb and the statement sent out by Barclays.


The wide premium developed after Barclays limited how many new shares can be created, inhibiting the normal mechanism that keeps an ETN’s price in line with its index. Most investors wouldn’t have known anything was amiss until a carefully worded release came out on Wednesday:

“Due to the current market dynamic in the sale by the issuer of ETNs from inventory, there are likely to be continued fluctuations in this premium if strong interest from exchange participants in purchasing the ETNs continues. …

The secondary market premiums for the ETNs have been volatile, however, and investors should not assume that the ETNs will continue to trade at a premium in relation to their intraday indicative value.”

Never One Roach's picture

I stand by myu opinion that oil is still going down to $20 or below. I agree with those CEOs in the energy sector who are battening down the hatches for lots more blood bathing.

Slartybartfast's picture

Our beloved treasury secretary already SAID that they would prop up the losses of banks due to the deterioration of oil prices.  Said it over a week ago.  This is probably what he meant.

onmail1's picture

Its all a game of coins

If you want ur coin up

everything else must go down

either by hook or crook or loot or shoot

or by armtwist


CabalA$$LickerLiarAddictHomObamma :

'We ocaissionally have to twist arms when countries don't do what we need them to'

(the global strategy of Satan America)

hedgiex's picture

A double digit premium still persisting with no arbitrages to cool it ? something smells. Moving to the alternative is not the alternative as of now.


agNau's picture

Someone just farted.

Joe A's picture

Here is a warning from the boss of Davos on Bloomberg. The fall in oil prices and crash in commodity prices can lead to a billion people going on the move. All on their way to Mutti.

atthelake's picture

Oil at $30. What's happening with derivatives?